Monday, March 12, 2012

China Experiences Worst Trade Deficit in a Decade. Demand for Resources Reaches Record Levels. Will the Chinese Consumer Force the Government to Spend its Currency Reserves?

Primary resource industries are poised to continue reaping record profits as China's demand surges and the country experiences its largest trade deficit in over a decade!

Chinese imports in February rose almost 40%, leaving the country with a trade deficit of $31.5 Billion. Exports rose at a slower pace of 18.4%. The primary contributor to the deficit was imports of fossil fuels, which Chinese consumers are demanding in ever increasing numbers as their preferences for American and European styled vehicles reaches record levels.

Inflation in China is heating up, but the administration is still apt to try and keep domestic demand growing in fear of growth collapsing amidst a European recession. Inflation, however, is trying to be reigned in at 4% per annum, a difficult prospect with oil reaching $125 per barrel recently on the international markets. Chinese demand for copper, iron, and oil all rose during February.

It was only a matter of time, but the Chinese consumer is now forcing the state to funnel some of its cash reserves back to the world market, and thankfully for Canada, we are selling the goods that they are buying.

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